Deary me. Australia is stuck with a trainwreck treasurer, a big problem for living standards.
Jim “Chicken” Chalmers has only been on the job for eighteen months, and he has already crashed real incomes more than any other modern Treasurer:
Four major Chalmers’ blunders brought about this little depression, and a fifth is set to worsen it.
The first was Chalmer’s failure to act after the Ukraine War shock spiked local gas (and electricity) prices.
There was no need for it. Australia has plenty of cheap gas. It required basic policy to stop the importation of scarcity prices.
But Chalmers was “scared” of mining blowback after the failed “super profits” mining tax in 2010 when he was a senior adviser to then treasurer Wayne Swan, so he did nothing.
When Treasury did act six months too late, it still didn’t curtail gas spot markets, leaving energy markets vulnerable to further shocks.
Chalmers’s second blunder was to uncork an unprecedented flow of low-value migrants to placate corporations, which immediately triggered a rental and housing inflation shock.
Today, a record 10% of the Aussie population is on a temporary visa and rental markets, in particular, are melting down.
The third blunder was to run an overly loose budget. In May 2022, Chalmers did not consider exceedingly loose state budget deficits and set his surplus target too low.
These three combined to add more than half of last quarter’s inflation blowout.
With wages set to be crushed by Chalmer’s out-of-control immigration, there’s no real wage relief in prospect, and living standards will keep falling.
The fourth blunder was to lie about all of it, which has become the Treasurer’s increasing habit in the past few months.
This illustrates that Chalmers does not take responsibility for his errors and moves too slowly to correct them.
The fifth and last blunder may turn out to be the worst.
Chalmers also undertook an RBA review. This culminated in his appointment of Michele Bullock as governor, even though she was the 2IC of the problems that had triggered the review in the first place.
The risk of corruption in such an appointment has been born out. Bullock’s credibility has collapsed in weeks as she fiercely defended the Treasurer’s terrible record in parliament instead of reassuring markets that the RBA would defeat his inflation.
Just as bad, the “independent ” RBA is now stuck in a half-pregnant reform process with a nobbled governor, no deputy and bond markets in no mood for compromise.
All Australian government’s borrowing costs rise as the RBA’s credibility falls. Bank’s borrowing costs will be next.
After decades of Australian fiscal and monetary levers set on autopilot, Jim “Chicken” Chalmers is showing that the hand on the controls does matter.
His gallinaceous claw is the wrong one.
